SINGAPORE - The number of nominee directorships that an individual can hold may soon be limited, as part of a review to ensure Singapore’s corporate regulatory environment remains robust.

The Accounting and Corporate Regulatory Authority (Acra) – the national regulator of business entities, public accountants and corporate service providers (CSPs) – is currently working on amendments to the Companies Act and Acra Act.

A number of Singapore residents, who were registered as a shareholder, director or secretary of firms set up by foreigners, have been accused of helping to set up shell companies that were used by scammers and money launderers.

Foreigners are required to engage a registered filing agent, including CSPs, to incorporate a company in Singapore.

They must also appoint at least one director who is living in Singapore. He can be a citizen, permanent resident, or entrepreneur pass or employment pass holder.

National University of Singapore business professor Lawrence Loh said changes to the law should be made in a well-calibrated manner.

“There should not be a blanket measure to punish all corporate service providers just because of an isolated incident such as the money laundering case.”

He said CSPs are necessary to help ease the process when someone wants to set up firms here.

“If Singapore wants to be the best place to do business, we need CSPs to help legitimate companies set foot here. Ultimately, these companies can create good jobs for Singaporeans and boost our economy.

“So it is important that measures put in place to tighten the regime do not affect our reputation for being business-friendly,” added Prof Loh.

Dr Ang Ser-Keng, the principal lecturer of finance at Singapore Management University’s business school, said multiple directorships can be a boon or bane.

“It can be a good thing if a director can, through multiple directorships, add value to all the firms from the breadth of knowledge and skills gained,” he said.

“The alternative hypothesis relates to busy directors who take on too many roles, leading to them not being able to deliver on their commitments.”

He added: “If we were to restrict directors from taking on multiple directorships, then the million-dollar question would be how many is too many?”

Mr Raymond Lam, chairman of the Chartered Secretaries Institute of Singapore, said the CSP landscape and money laundering trends are constantly evolving, which means the industry needs to be agile and nimble to cope with these changes.

“In my view, a limit on the number of nominee director appointments that an unregulated person can hold will raise the standards of the directors in Singapore generally and ensure that only qualified individuals can provide the nominee director service,” he said.

Acra rules show that a company director is responsible for managing the affairs of the company and setting its strategic direction, while a secretary is responsible for the administration of the firm.

A shareholder can be an individual, a company or a limited liability partnership.

Several CSPs that The Straits Times spoke to said it is important for checks and balances to be done, to ensure the legitimacy of the individual and the firm being set up.

Mr Robin Yoo, managing director of Agile 8, told ST that there have been instances of individuals e-mailing the CSP firm for assistance with employment passes, after setting up companies.

“When we asked them what their business model is and how they intend to fund it, they went silent.

“This then makes it obvious that obtaining employment passes was their main intention for setting up a company here,” said Mr Yoo. 

This was allegedly the case with an individual linked to one of the 10 foreigners arrested in a $2.8 billion money laundering probe.

The wife of Wang Baosen, one of the accused, had set up a company in Singapore to secure an employment pass for herself.

In an affidavit to support the prosecution’s application that no bail be granted to Wang, a Commercial Affairs Department officer said He Huifang had claimed to be an investment consultant in the company.

Mr Yoo said that as Singapore welcomes more businesses, regulators recognise that there is a need to strengthen the regulatory and enforcement framework to manage anti-money laundering checks.

Acra is expected to table the Bill on amendments to the Company Act and Acra Act in 2024.

Among other things, it will propose additional measures for CSPs, including restrictions on the number of roles an individual can hold. 

Mr Victor Lai, principal consultant of CitadelCorp, said: “These (measures) will have the effect of raising the bar for people to act as nominee directors and secretaries of companies in Singapore. 

“We expect that this will also consequently increase the standard of CSP firms.”

The task to weed out dubious actors and firms can be challenging. 

CitadelCorp said it was approached by a group of companies, whose beneficial owner was based overseas, to provide secretarial services.

Although the group initially cleared anti-money laundering checks, CitadelCorp dug deeper and found adverse media reports that alleged the group was previously involved in financial crime and corruption in a foreign jurisdiction. 

“We performed further investigations and discovered that the prospective client had succeeded in arranging for the removal of its name from subscription-based global compliance screening platforms,” said Mr Lai. 

He added that a person or company can fight to refute any links to alleged criminal activity, and have their names removed from global compliance screening platforms. 

This means the CSPs’ due diligence processes can become even more complex. 

In September, ST reported that scammers had set up firms in Singapore and moved their ill-gotten gains here by exploiting rules that allowed registration processes to open bank accounts to be carried out remotely during the Covid-19 pandemic. 

Twelve individuals were charged earlier in 2023 after they inadvertently helped scammers launder more than US$36 million (S$49 million) through Singapore bank accounts.

Investigations showed that between July 2020 and February 2021, foreign agents incorporated 35 local companies and opened Singapore bank accounts to launder these criminal proceeds.

The 12 individuals had acted as resident directors of these companies, or abetted the directors’ offences.

Said Mr Jackson Lim, co-founder of Grof: “If dubious actors can slip through checks by banks, what more smaller CSPs like us with limited resources?”